Since first writing about my plans to invest more in P2P through Prosper.com, I’ve been having a difficult time mobilizing a sizable amount of assets to make a difference in my passive income stream portfolio. When I say sizable, I mean more than $50,000. The main reason is that I’m just not absolutely comfortable making loans to strangers, no matter how good their credit ratings.
I realize if I invest in over 100 of the highest rated loans, the chances are high that I will be able to earn at least 5% vs. the 7-8% advertised through P2P. But there’s something about my desire to invest my money to help someone I personally know that keeps most of my money away from P2P.
The best reason to borrow via P2P is to consolidate your debt into a lower interest rate P2P loan. I also have a soft spot for lending people money over Prosper to pay off medical bills. Accidents happen all the time, and they are usually not the victim’s fault. Every single other reason to borrow money over Prosper does not gel with my lending standards, even if the interest rate is higher. (Read: The Main Reasons To Borrow Through Peer-To-Peer Lending)
So I’m faced with the dilemma of continuously lending money to strangers at a 5-10% interest rate to consolidate their debts or lend money to a friend who started a hedge fund and is looking to build his assets under management. I’d like for you to weigh in on this decision because $150,000 is at stake.
LENDING MONEY DIRECTLY TO A CREDIT WORTHY FRIEND